Critical Evaluation of Breach of Trust Defenses in UK Law

This essay critically evaluates the circumstances under which a trustee may successfully plead a defense to an established breach of trust within the United Kingdom legal framework. It delves into various defenses, including consent, where the beneficiary knowingly agrees to the breach; acquiescence, where the beneficiary implicitly accepts the breach; and the provisions of the Trustee Act 1925, specifically sections 61 and 62. Section 61 allows the court to excuse a trustee who acted honestly and reasonably, while section 62 addresses breaches instigated by the beneficiary. The essay examines relevant case law, such as Walker V Symonds, Spellson V George, Fletcher V Collis, Re Pauling's Settlement Trusts, Re Ker, Holder V Holder, and Marsden v Regan, to illustrate the application of these defenses. The discussion also considers the limitations for laches. The essay provides a comprehensive analysis of the legal principles and practical considerations surrounding trustee liability and defenses in breach of trust claims.

BREACH OF TRUST; DEFENCES 1
DEFENCES; BREACH OF TRUST TRUST IN THE UNITED KINGDOM
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Introduction
The law of trust was created to help in the creation and managing of one's assets by another
independent party. It is important to note that the person whose wealth is kept is referred to as
the beneficiary while the person who is left as the custodian and manager of the assets is referred
to as a trustee1. The United Kingdom Trustee Act of 19252 was created with the aim of
addressing the dissatisfaction that arose from the judgments made under the common law courts
regarding the mismanagement of property. The trustee has only one purpose to manage the
property and assets to the best interest of the beneficiary; that is the beneficiary must act in good
faith to the benefit of the beneficiary.3 Trusts cover a wide range of property. It is essential to
beware that creating a trust is similar to creating a contract; that is, when forming a trust there are
no formalities unless it is an express condition by the law. However, if the asset is either a parcel
of land, shares, or wills the statutes have been enacted to guide the formation of such trusts.4
Once a trust has been duly formed, the trustee and beneficiary are bound by the specific terms of
the trust. Primarily, the terms are of the trust are what guide the trustee on how he is supposed to
manage the asset, however, the law by default provides the full rights, obligations, and how the
property should be managed.5 This paper is aimed at exploring under what circumstances a
trustee may plead a defence of an established breach of trust.
Breach of Trust Defences
Many are times that trustees breach the trust. A breach to trust is defined as an act or omission
done by the trustee that is not allowed by the terms of the trust or by the law governing trusts.
The breach of trust may occur in various forms;
The trustee distributing the assets to a different settler that the one stated in the trust. The
distribution of resources should be done as desired by the settlor. The distribution to any person
other than the stated beneficiary amounts to a breach of the trust.
1 J E Penner, The Law of Trusts (10th edn, Oxford University Press, 2016)
2 Trustee Act 1925 (c 19)
3 Armitage v Nurse [1997] EWCA Civ 1279
4 Mohamed Ramjohn, Unlocking Equity and Trusts (6th edn, Routledge, 2017)
5 Gary Watt, Equity & Trusts Law (5th edn, Oxford University Press, 2016)

BREACH OF TRUST; DEFENCES 3
Investing the trust fund in other activities and business ventures other than the ones
outlined in the trust. A trust fund is either guided by statutory law of the settlor's wishes;
therefore, if the trustee wishes to invest this fund it must be in tandem with the set-out rules.
At times self-dealing may arise leading to the trust purchasing the asset. Avoiding the
creation of conflicts of interest in trust is crucial. The trustee should not purchase the property he
is managing as this will bring rise to a conflict of interest. This results in a breach of the fiduciary
duty.
The law is very clear that one shall not suffer a course without remedy. Whenever a trustee acts
or fails to act in a manner that interferes with the interests of the beneficiary and the standards set
by the trust and statutory conditions.6
Consent
This defence arises when the trustee received the go-ahead to breach the trust. In the matter
between Walker V Symonds7, it was held that the trustee is not liable to a breach of trust sui juris
and will full knowledge of the beneficiary who has given the go ahead. It is common knowledge
that as at the time the beneficiary was consenting he knew the legal impact and consequences of
his consent. Consent may take various forms it may be initiated by the beneficiary, confirmation,
or adoption.
Characteristics of consent
Should be clear
The consent given should bear no uncertainty nor ambiguity. In the matter between Spellson V
George8, it was concluded that for one to plead for consent after breaching of trust then the
consent must to be clearer to ensure that the beneficiary is fully aware of the pending breach and
its consequences. It was held that the actions of the beneficiary were not a representation of
being fully informed of the breach in contract.
6 Daniel Kelly, 'Deterrence and Disgorgement in Trust Fiduciary Law' <https://papers.ssrn.com/sol3/papers.cfm?
abstract_id=2952755> accessed 10 May 2019.
7 Walker V Symonds [2014] QCA 148
8 Spellson v George [1987] 11 NSWLR 300

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Shall not benefit the Beneficiary
It is not mandatory that the beneficiary benefits from the consent to breach. In the case OF
Fletcher V Collis,9 it was a common rationale that the beneficiary shall not instigate proceedings
seeking to recover from the loss suffered after consenting to the breach of trust. It was presumed
that the Fletchers had consented to the trustee making a loss. The Fletchers were fully aware of
the consequences of their consent.
The person consenting must be of legal age and capacity
Consent to a breach of trust must be made by a beneficiary who satisfies the bare minimum
requirements on age and capacity. Capacity refers to the mental state of the person consenting to
the breach; that is he must be of sane mind and must not be intoxicated. The age for consenting is
18 years old.
Shall be free from Undue Influence
The consent given should be out of the beneficiaries’ free will and not induced. Undue influence
arises typically from the power imbalance between the beneficiary and the trustee. In addition,
undue influence may arise due to the beneficiary being aware of the end results of the breach.
The trustee may be held accountable if he knew that the beneficiary as at the time of consenting,
was acting under the undue influence of another or there was a presumption of such. This
statement was echoed in the matter involving Re Pauling's Settlement Trusts.10
Acquiescence by the Beneficiary
A beneficiary lacks the right to succeed in a suit against the trustee if the beneficiary acquiesces
to the breach of trust. This defence only holds when the two crucial elements have been satisfied
by the beneficiary; there must not be an undue influence when the client was agreeing to the
breach. Furthermore, the court must be convinced beyond a reasonable doubt that the beneficiary
was privy to the implications of the breach. To satisfy this, the beneficiary must have acted or
9 Fletcher v Collis [1905] 2 Ch 24
10Re Pauling's Settlement Trusts [1963] 3 All ER 1

BREACH OF TRUST; DEFENCES 5
omitted in a way that amounts to acceptance of a pending breach of trust. In Re Ker,11 it was held
that acquiescence may be exuded by studying the conduct of the beneficiary.
In Holder V Holder,12 it was determined that the trustee must inform the beneficiary of the
consequences of his consent. This is a prerequisite for this defence to hold in court. It is
mandatory that all the facts be presented to the beneficiary before they can be deemed to have
consented to the breach.
Section 61 of the Trustee Act of 1925
This section of the Trustee Act of 1925 suggests that the court is at liberty to determines whether
a trustee who has appeared before court for either being personally or partially liable to the
breach of a trust, whether the breach of trust occurred before or after the commencement of the
said act, but he acted with honesty and reasonability, has the right to be fairly excused for the
breach of trust and for omitting to seek the guidance of the court while carrying out the breach
then the court may wholly or partially excuse the trustee from the personal liability of the same.
This section invokes a tort law approach by including the terms "reasonableness and honesty" of
the actions of the trustee. Also, for the trustee to rely on this section he must meet the minimum
requirement of this section; acting in reasonableness and all honesty, failure to satisfy this the
defence will not hold.13 The court is at discretion in the application of this section once the
requirements have been met. The term “ought” has a mandatory meaning, therefore if the trustee
acted in a reasonable and honest manner he shall be fairly excused. In Marsden v Regan14, the
trustee was fairly excused on the basis that he acted and relied on poor legal advice that led to the
breach.
This work would like to look at two essential elements under this section critically;
Reasonability
This is a characteristic of the law of tort, it borrows from the tort principle that one ought to take
reasonable care and caution throughout their dealings with others. If the trustee can prove that
11 Re Ker [1904] 24 NZLR 1
12 Holder V Holder [1968] Ch 353
13 Judith Riches, Equity And Trust (2nd edn, Routledge 2017).
14 Marsden v Regan [1954] 1 WLR 423

BREACH OF TRUST; DEFENCES 6
indeed he acted with reasonableness and he satisfies the other essential elements under section 61
of the Trustee Act, then he may be relieved of any liability arising from the breach. In most
cases, the trustee has often satisfied the elements set out under this section save for the
reasonability component; therefore, they end up being held liable for the breach.
"Ought fairly to be excused."
In Marsden v Regan, the trustee relied upon poor legal advice leading to an unfruitful investment
that led to the beneficiary suffering a loss. The claimant was complaining that the defendant had
made several payments to offset some business creditors. A loss was suffered as the trustee
ended releasing some debts. The claimant relied upon former dealings with the trustee, to
persuade the court into not relieving the trustee from the breach. The court fairly excused the
trustee for relying on the poor legal advice.
The judge held that the defendant had acted reasonably and with honesty on the poor advice
given by the advocate causing the breach thus he had to be fairly excused. Although on appeal
Lord Denning had doubts that the trustee ought fairly to be excused, he felt that a contrary
opinion would interfere with the informed opinion that the judge had made prima facie.
Section 62 of Trustee Act of 1925
This section of the trustee states that;
"where a trustee commits a breach of trust at the instigation or request or with the consent
in writing of a beneficiary, the court may if it thinks fit make such order as the court
seems just impounding all or any part of the interest of the beneficiary in the trust estate
by way of indemnity to the trustee or persons claiming through him"
This section of the Trustee Act ensures that the beneficiary who by full knowledge instigates a
breach of trust is not allowed to bring any action against the trustee. However, this section doe
not totally bar beneficiaries from instituting proceedings. If such circumstances arise the court is
allowed to exercise its full discretion in impounding the interests of the beneficiary.
This defence is applicable to the extent that the consent made was in writing and the beneficiary
was aware of all the facts. The court's juridical discretion stops when it has been brought to the

BREACH OF TRUST; DEFENCES 7
court's attention that the beneficiary was not privy to the detailed facts. In the application of this
section, it is immaterial whether that beneficiary benefitted from the breach or not.
Statutory Limitations for Laches
Most civil suits have a timeline for which the claimant is allowed to bring an action for a wrong
suffered. It is crucial that one adheres to these timelines15. As equity states time defeats equity.
For the beneficiary to bring an action against the trustee, he is supposed to instigate the
proceedings before the window lapses. Statutory limitations for laches are aimed at outlining the
time frame within which the beneficiary has the right to pursue a cause for legal action
concerning the relevant to trust property. Judge Kekewich J. in the case of Re Timmins interprets
in depth the intention of the statutory limitations, he states that; the reason for the imposition of
timelines is to the benefit of the trustee, he further acknowledges the fact that although the
trustee had done something legally wrong, he did not err morally16. However, Judge Kekewich
highlights that this time limits are not meant to protect the trustee in circumstances where he
benefitted from the breach of trust by the acquisition of items that he ought not to have.
Time Frame
According to the Limitations Act of 198017, it is stated under section 21(3) that the beneficiary
has a period of 6 years since the day he accrued the cause for legal action to institute a
proceeding against the trustee. This is not an absolute declaration of the law as special occasions
allow the beneficiary to bring a cause for legal action; that is, time does not run against the
beneficiary in the circumstances such as the beneficiary falling ill or being in a coma.
A cause for legal action may be brought outside the 6 year period if it concerns beneficiaries
with future interests. In Cattley v Pollard18, after the appointment of new trustees, a claim was
brought against the former trustee and was successful. After the lapse of the 6 year period
provided for by the statutes, a new claim was brought against the former trustee's accomplices.
This issue was brought on behalf of nine life beneficiaries and 17 residual beneficiaries. The
15 Michael Furness, 'Statutory Limitation Periods For Claims Related To Breaches Of Trust' (2017) 23 Trusts &
Trustees.
16 Re Timmins [1902] 1 Ch 176
17 Limitations Act of 1980 (c. 58)
18 Cattley v Pollard [206] EWHC 3130 (Ch)

BREACH OF TRUST; DEFENCES 8
court held that the matter would be admitted and the application to bar the proceedings due to the
lapse in time failed.
The court of appeal on certain occasions has denied the claimant leave after the expiry of the 6
years. The case of Nelson V Rye was overturned when the court rejected the claimant leave in
order to change the documentation that was filed six years ago.19
Laches
Laches is a doctrine of equity that is applied where the time limits are not provided20. The
application of this is based on the maxim that "equity favours the vigilant." The court takes into
keen consideration the reasonable time and the prevailing circumstances that may render it
difficult for a claim to be brought. Lord Camden in Smith v Clay, concludes that;
"a court of equity has always refused its aid to stale demands, where a party has slept
upon his rights and acquiesced for a great length of time. Nothing can call forth this court
into activity, but conscience, good faith, and reasonable diligence; where these are
wanting, the court is passive and does nothing"21
Based on the maxim that delay defeats equity it may seem inequitable if the court was to allow
the claimants wish to succeed. It is fundamental that the court can assess whether the delay has
led to the positional and substantial change by the defendant that if the claimant claimed to
succeed it would be detrimental to the defendant.22
Protection from Co-Trustee
In cases of joint trustees, one trustee may draw indemnity from co-trustees who are more
culpable. The general rule is that when one trustee breaches the trust the other trustees are
equally responsible for the same. This is referred to as "equitable right to contribution."
However, in cases of an expert being amongst the trustees and advice on what should be done,
they are held more liable than the other trustees.
19 Nelson V Rye [1996] 2 All ER 186
20 C. Stanley and M. J. Ashdown, 'Laches And Limitation' (2014) 20 Trusts & Trustees.
21 Smith v Clay [1767] 29 ER 743
22 Lindsay Petroleum Co. v Hurd (1874) LR 5

BREACH OF TRUST; DEFENCES 9
This defence is applicable only when:
 the other trustees rely on the advice of one trustee who happens to be a solicitor'
 in cases where one of the trustees has benefitted from the breach of the contract in which
the other trustees did not per-take,23 and
 a trustee must not be able to benefit from a property to which he is also a beneficiary.
Conclusion
Although various defences are available at the disposal of the trustee in case of a breach of trust,
it is essential that the trustee understands the bare vital elements that must be met for a particular
defence to hold.
23 Goodwin v Duggan & Ors [1996] NSWSC 363

BREACH OF TRUST; DEFENCES 10
BIBLIOGRAPHY
Books, Reports, and Articles
Penner, J. E, The Law of Trusts (10th edn, Oxford University Press, 2016)
Watt, G, Equity & Trusts Law (5th edn, Oxford University Press, 2016)
Ramjohn, M, Unlocking Equity and Trusts (6th edn, Routledge, 2017)
Kelly D, 'Deterrence and Disgorgement in Trust Fiduciary Law'
<https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2952755> accessed 10 May 2019
Riches J, Equity and Trust (2nd edn, Routledge 2017)
Furness M, 'Statutory Limitation Periods for Claims Related To Breaches of Trust' (2017) 23
Trusts & Trustees
Stanley CM Ashdown, 'Laches and Limitation' (2014) 20 Trusts & Trustees
Statutes
Trustee Act 1925 (c 19)
Limitations Act of 1980 (c. 58)
Cases
Armitage v Nurse [1997] EWCA Civ 1279
Walker V Symonds [2014] QCA 148
Spellson v George [1987] 11 NSWLR 300
Fletcher v Collis [1905] 2 Ch 24
Re Pauling's Settlement Trusts [1963] 3 All ER 1
Re Ker [1904] 24 NZLR 1
Holder V Holder [1968] Ch 353
Marsden v Regan [1954] 1 WLR 423
Re Timmins [1902] 1 Ch 176
Cattley v Pollard [206] EWHC 3130 (Ch)
Nelson V Rye [1996] 2 All ER 186
Smith v Clay [1767] 29 ER 743
Lindsay Petroleum Co. v Hurd (1874) LR 5
Goodwin v Duggan & Ors [1996] NSWSC 363